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1The auditor has considerable responsibility for notifying users as to whether or not the statements are properly stated. This imposes upon the auditor a duty to:
- AProvide reasonable assurance that material misstatements will be detected.
- BBe a guarantor of the fairness in the statements.
- CBe equally responsible with management for the preparation of the financial statements.
- DBe an insurer of the fairness in the statements.
2When dealing with laws and regulations that do not have a direct effect on the financial statements, the auditor:
- AShould inquire of management about whether the entity is in compliance with such laws and regulations.
- BHas no responsibility to determine if any violations of these laws has occurred.
- CMust report all violations, including inconsequential violations, to the audit committee.
- DShould perform the same procedures as for violations having a direct effect on the financial statements.
3The following stages comprise a typical money laundering process. What is the right sequence of the process ?
Creating layers of financial transactions
2. Breaking up large amounts of cash into smaller sums and placing them into the financial system
3. Integrating the money into the economic system as if it is "clean" and comes from legitimate sources- A1,2 and 3
- B1, 3 and 2
- C2, 1 and 3
- D3, 1 and 2
4Which of the following considerations of fraud and error by the auditor is not required by ISA 240?
- AWhen the auditor encounters circumstances that may indicate that there is a material misstatement in the financial statements resulting from fraud or error, the auditor should inform regulatory institutions
- BBased on the risk assessment the auditor should design audit procedures to obtain reasonable assurance that material misstatements arising from fraud and error are detected
- CThe auditor should be satisfied that those charged with governance have been informed of any material weaknesses in internal control related to the prevention and detection of fraud
- DThe auditor should communicate to management any material weaknesses in internal control related to the prevention or detection of fraud and error
5If an auditor discovers fraud, an auditor should:
- AConduct further investigations
- BApproach the appropriate level of management
- CConsider withdrawing from the audit if the fraud is significant
- DAll of the above
6Financial involvement with a client will affect independence and may lead a reasonable observer to conclude that independence has been impaired. Which of the following is not a form of financial involvement with a client?
- ALoans to or from the client
- BFinancial interest resulting from being an administrator of any trust with a financial interest in the client
- CFinancial interest in a joint venture with a client
- DFees paid for audit engagement
7Which of the following matters is not ordinarily included in a management representation letter?
- AAmount of potential loss from litigation, including court costs
- BManagement's acknowledgment of its responsibility for the fair presentation of financial statements
- CDisclosure of compensating balances and other arrangements involving restrictions on cash balances
- DPlans or intentions that may affect the carrying value or classification of assets
8Which of the following would be considered a 'self-interest threat'?
- APotential employment with an assurance client
- BActing as the client's advocate in a legal proceeding
- CWhen a member of the assurance team was previously a director or officer of the assurance client
- DA member of the assurance team has a close family member who is a director or officer of the assurance client
9Which of the following is not a duty of the audit committee?
- ASpecial Investigations
- BReview of internal controls
- CMonitor the effectiveness of external auditor
- DLiaison with external controls
10When planning the audit, if the auditor has no reason to believe that illegal acts exist, the auditor should:
- AInclude audit procedures which have a strong probability of detecting illegal acts.
- BStill include some audit procedures designed specifically to uncover illegalities.
- CIgnore the issue.
- DMake inquiries of management regarding their policies for detecting and preventing illegal acts and regarding their knowledge of violations, and then rely on normal audit procedures to detect errors, irregularities, and illegalities
11All of the following factors influence the continuance of an existing auditor-client relationship except:
- AThe balance of client fees owed
- BExcessive risk
- CPending litigation between client and auditor
- DInability to obtain a management representations letter
12Important determinants of audit fees all of the following except:
- AThe size of the audit firm
- BThe type of client - whether the auditee is an existing client or not
- CThe size of the auditee and the geographical dispersion
- DThe quality of the auditee's internal control system
13Advertising and promotional material by auditors:
- ACould include exact fees
- BShould not discredit the services offered by other firms
- CCould fall short of requirement of UK Advertising Standard Agency
- DCould be misleading either directly or by implication
14In evaluating engagement risks, the auditor should be aware of items such as:
- AThe client's previous year's profits
- BThe client's method of financing growth
- CThe client's liquidity position
- DAll of the above
15Qualitative factors can affect an auditor's assessment of materiality. Which of the following statements is true?
I. Misstatements that are otherwise immaterial may be material if they affect earnings trends.
II. Misstatements that are otherwise minor may be material if there are possible consequences arising from contractual obligations.- AI only
- BII only
- CI and II
- Dneither I nor II
16The three main elements of risk in a business are:
- AFinancial risk, Operational risk; Compliance risk
- BFinancial risk, Control, Operational risk,
- CControl risk, Operational risk, Compliance risk
- DControl risk, Financial risk, Compliance risk
17The major limitation of using the audit risk model is the:
- AObjective nature of its components
- BThere is no limitation to the model
- CApplication of the model
- DSubjective nature of its components
18When an auditor calculates the gross margin as a percent of sales and compares it with previous periods, this type of evidence is called
- APhysical examination
- BAnalytical review
- CObservation
- DInquiry
19Quality control policies and procedures that are established to decide whether to accept a new client should provide the audit firm with reasonable assurance that:
- AThe audit firm's duty to the public concerning the acceptance of new clients is satisfied.
- BThe likelihood of associating with clients whose management lacks integrity is minimized.
- CClient-prepared schedules that are necessary for the engagement are completed on a timely
- DSufficient corroborating evidence to support the financial statement assertions is available.
20Which of these issues relating to good engagement performance should be addressed in an audit firm's procedures manual
- ADirection
- BSupervision
- CReview
- DAll of the above
21When a group auditor uses the work of a component auditor he must document:
- AThe professional qualifications, independence and professional competence of the other auditor
- BProcedures to obtain sufficient appropriate audit evidence that the work of the other auditor is adequate is all the consideration necessary
- CThe impact of internal controls on the work of the other auditor
- DThe audit area in which the work was performed by the other auditor
22Procedures to obtain sufficient appropriate audit evidence that the work of the other auditor is adequate is all the consideration necessary
- AA. Direction and supervision of the audit group
- BB. Provision of essential technical information
- CC. Participation in the policy making process
- DAll of the above
- EA and B
- FA and C
- GB and C
23In the context of group audit, if a component is significant due to its nature or circumstances, the auditor:
- AMust carry out a full audit of the component using the component materiality
- BMust carry out an audit of specified account balances related to identified significant risks
- CMust carry out specified audit procedures related to identified significant risks
- DAll of the above
24What is the type of assurance engagement that has as its subject matter non-historical financial information?
- AProspective financial information
- BReview of financial statements
- CSpecial purpose engagement
- DAgreed-upon procedures
25In an agreed-upon procedures engagement what matters generally have to be agreed between auditor and management?
- ANature, timing and extent of the specific procedures to be applied
- BThe intended user of the report
- CThe skills of the audit team
- DIdentification of the corporate governance framework
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- Advanced Audit Principles and Practice Mock In class test
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- clara.azurmendi
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- English
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